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Kiev - Ukraine moved on Thursday to mobilise a volunteer force to ward off Russia's expansionist threat as Berlin warned Moscow of long-term damage to its economy and EU relations over the Crimea crisis.

The Verkhovna Rada parliament unanimously backed the creation of a new force of up to 60 000 volunteers who could keep Russian troops from advancing beyond the Crimean peninsula they seized at the start of the month.

The dramatic decision to bolster Ukraine's defences with people outside the army came shortly after US President Barack Obama threw his full weight behind Ukraine's new pro-European leaders in their Cold War-style standoff with the Kremlin.

National Security and Defence Council chief Andriy Parubiy said the new National Guard would "ensure state security, defend the borders, and eliminate terrorist groups" - a term many in Kiev use to call the well-armed militias who patrol Crimea alongside Russian troops.

Ukraine's conventional army of 130 000 soldiers - half of them conscripts with ageing equipment - is dwarfed by a 845 000-strong Russian force that has the backup of nuclear weapons.

The flaring crisis on the eastern edge of Europe was sparked by the ousting last month of a pro-Kremlin government that prompted President Vladimir Putin to seek and win the right to use force against a neighbour for the first time since a brief 2008 war with Georgia.

The more nationalist and Western-leaning team that rose to power on the back of a deadly popular revolt is viewed with derision by Putin and increasing warmth by Washington and EU states.

Putin's 1 March decision to order troops into Crimea for the "protection" of the Russian-speaking majority there now threatens to bring down a host of political and economic sanctions that could leave the Kremlin more isolated from the West than at any point since the 1989 fall of the Berlin Wall.

German Chancellor Angela Merkel - a fluent Russian speaker whose upbringing in Communist East Germany shaped both her cautious approach to Moscow and understanding of the importance of keeping relations with the Kremlin on track - delivered her most ominous warning to date in an appearance before the German parliament.

'Massively damage Russia'

"If Russia continues its course of the last weeks, it would not only be a catastrophe for Ukraine," she told the chamber.

"It would not only change the relationship of the European Union as a whole to Russia. No, it would also, and I am firmly convinced of this, massively damage Russia both economically and politically."

Merkel accused Russia of using the "failed" expansionist tactics of the previous two centuries.

Russia's parliament is still due to consider legislation next week simplifying the process for the annexation of Crimea - a strong possibility after the Black Sea region holds a hotly disputed referendum on Sunday on switching over to Kremlin rule.

The Organisation for Economic Co-operation and Development said meanwhile that it had postponed the process for the Russian Federation to join its 34-member organisation.

The European Union will debate travel bans and asset freezes on Monday against Russian officials held responsible for threatening Ukraine's territorial integrity.

Brussels is also expected next week to offer Ukraine a chance to sign an historic EU trade pact whose abrupt November rejection in favour of closer ties with Russia sparked the initial wave of Kiev unrest.

The White House has been moving on punitive measures faster than its European allies - their financial and energy sectors intertwined tightly with Russia - and has already approved visa restrictions and financial penalties on Moscow officials.

But Obama told Ukraine's visiting Prime Minister Arseniy Yatsenyuk on Wednesday that Washington was willing to move much further if Putin failed to soften his stance immediately.

'We will stand with Ukraine'

"There's another path available and we hope President Putin is willing to seize that path," Obama told reporters after awarding Yatsenyuk - whose legitimacy Putin rejects - the honour of a government leader by meeting him in the Oval Office.

"But if he does not, I'm very confident that the international community will stand firmly behind the Ukrainian government."

And Obama made plain where he stood on Russian troop movements in Crimea that began at the start of the month.

"We have been very clear that we consider the Russian incursion into Crimea outside of its bases to be a violation of international law," Obama stressed.

"And we have been very firm in saying that we will stand with Ukraine and the Ukrainian people in ensuring that territorial integrity and sovereignty is maintained."

US officials say Moscow will have its best chance to show a willingness to compromise and avert even more punishing Western measures on Friday during talks in London between Secretary of State John Kerry and Russian Foreign Sergei Lavrov.

But Russia has thus far showed no willingness to either call back its troops or reconsider its support for a referendum that both Kiev and much of the global community view as illegitimate.

The White House said on Sunday that even Moscow's key diplomatic ally Beijing supported Ukraine's "sovereignty and territorial integrity" after talks between Obama and Chinese President Xi Jinping.

G7 denounces 'annexation'

Putin's isolation intensified still further on Wednesday when the Group of Seven (G7) industrialised nations urged Russia "to cease all efforts to change the status of Crimea contrary to Ukrainian law and in violation of international law".

"The annexation of Crimea could have grave implications for the legal order that protects the unity and sovereignty of all states," said the statement from countries accounting for more than 60% of global wealth.

France meanwhile said that an annual visit by the country's defence and foreign ministers to Moscow - initially planned for Monday and seen as a symbol of Moscow's close partnership with Paris - was conditional on "progress" on Ukraine.

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